This preview shows page 165 - 167 out of 261 pages.
dollars, it would be entirely possible for us to overtake Baidu.” Zhou becamefrustrated by the managers at Yahoo headquarters: “They were unwilling toinvest in the company’s future. It is like farming. If you only care aboutharvesting, but not fertilizing or cultivating, eventually the land will lose itsvitality.”China was the least of Yahoo’s worries. In the United States, the companywas being eclipsed by Google, whose algorithmic search engine was outgunningYahoo’s directory-based design. Yahoo was slow to recognize the threat posedby Google, a company like Yahoo founded by two Stanford Ph.D. candidates.Yahoo had missed an opportunity in 1997 to buy Google from Larry Page andSergey Brin, but its biggest mistake of all was the June 2000 decision to makeGoogle its search partner. With Google’s logo featured on its home page,millions of customers discovered a superior search product and gateway to thebroader Internet that made Yahoo increasingly irrelevant.14In July 2005, six months before the end of his two-year earn-out, Zhouannounced he was quitting Yahoo China. Within two months he had set up hisowncompany,Qihoo360Technology.Herehewouldadoptthesameaggressive tactics15that he’d used at 3721.It wasn’t long before Zhou took to the media to criticize Yahoo, tellingjournalists that selling 3721 to Yahoo was his biggest regret, that Yahoo’scorporate culture stifled innovation, and that the firm was poorly managed:“Yahoo’s leaders have unshakable responsibility for its decline. Whether it isspiritual leader Jerry Yang or former CEO [Terry] Semel, they are good people,but [they] are not geniuses. They lack true leadership qualities. When facingcompetition from Google and Microsoft, they didn’t know what to do, and hadno sense of direction.”Yahoo had struck out twice in China: first Founder, then 3721. After yearsof frustration, Jerry Yang made a bold decision. He handed Jack $1 billion, andthe keys to Yahoo China’s business, in exchange for a 40 percent stake inAlibaba.
Project PebbleAlthough it took some time for them to realize it, the deal was transformative forAlibaba and Yahoo. Alibaba gained the ammunition to finish off eBay in China,and to build Taobao and Alipay into the behemoths that they are today. Therising value of its stake16gave Yahoo leverage in dealing with its increasinglyfrustrated investors, concerned about its deteriorating market position versusGoogle and its subsequent controversial decision to rebuff Microsoft’s offer tobuy the company.The deal originated in a May 2005 meeting17between Jack and Jerry at thePebble Beach golf course in California. Before a steak-and-seafood dinner withother tech luminaries from the United States and China, the two founders, whohad a common shareholder in Masayoshi Son, took a stroll18outside. Jackrecalled, “It was extremely cold that day, and after ten minutes I couldn’t bear itanymore. I ran back indoors. [But] in those ten minutes we exchanged someideas. I told him clearly that I wanted to enter the search business, and myopinion was that search engines would play a very important role in e-commercein the future.”